UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM 10-Q

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2006
                               -----------------

                                       Or

 []   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to
                               ----------------    -----------------

Commission File No. 0-8693
                    ----------------------


                              TRANSNET CORPORATION
                              --------------------
             (Exact name of registrant as specified in its charter)

        Delaware                                            22-1892295
--------------------------------            ------------------------------------
(State or other jurisdiction of             (IRS Employer Identification Number)
Incorporation or organization)

45 Columbia Road, Somerville, New Jersey                              08876-3576
----------------------------------------                              ----------
(Address of principal executive offices)                              (Zip Code)

Registrant's Telephone Number, Including Area Code:                 908-253-0500
                                                                    ------------

--------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last Report

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                                            Yes   X     No
                                                                -----      -----

Indicate by check mark whether the registrant is an accelerated filed (as
defined in Rule 12b-2 of the Exchange Act)

                                                            Yes         No   X
                                                                -----      -----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of February 2, 2007: 4,823,304.

<PAGE>

                              TRANSNET CORPORATION
                                    FORM 10-Q

                                TABLE OF CONTENTS



                                                                       PAGE NO.
PART I.  FINANCIAL INFORMATION

         Consolidated Balance Sheets
                  December 31, 2006 (unaudited) and June 30, 2006         1


         Consolidated Statements of Operations (unaudited)
                  Three Months Ended December 31, 2006 and 2005           2
                  Six Months Ended December 31, 2006 and 2005             3


         Consolidated Statements of Cash Flows (unaudited)
                  Six Months Ended December 31, 2006 and 2005             4


         Notes to Consolidated Financial Statements                       5


     Item 2.  Management's Discussion and Analysis                        9


     Item 4.  Controls and Procedures                                    13


PART II.  OTHER INFORMATION


     Item 6.  Exhibits and Reports on Form 8-K                           14

     Signatures                                                          14
     Certifications                                                      15


                                       i.
<PAGE>

                       TRANSNET CORPORATION AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                               December 31,              June 30,
                                                                                                   2006                    2006
                                                                                               ------------            ------------
                                                                                               (unaudited)
<S>                                                                                            <C>                     <C>
ASSETS:
CURRENT ASSETS
Cash and Cash Equivalents                                                                      $  1,702,113            $  4,034,495
Accounts Receivable - Net                                                                         6,498,490               3,438,526
Inventories                                                                                         943,011               1,501,695
Other Current Assets                                                                                127,907                  70,013
Deferred Tax Asset                                                                                  209,755                 133,941
                                                                                               ------------            ------------

TOTAL CURRENT ASSETS                                                                           $  9,481,276            $  9,178,670


PROPERTY AND EQUIPMENT - NET                                                                        503,122                 563,543


OTHER ASSETS                                                                                        281,375                 280,035
                                                                                               ------------            ------------

TOTAL ASSETS                                                                                   $ 10,265,773            $ 10,022,248
                                                                                               ============            ============

LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts Payable                                                                               $    522,043            $     89,465
Accrued Expenses                                                                                    332,460                 316,662
Income Taxes Payable                                                                                  4,241                   9,611
Floor Plan Payable                                                                                  625,528                 621,507
                                                                                               ------------            ------------

TOTAL CURRENT LIABILITIES                                                                      $  1,484,272            $  1,037,245


DEFERRED TAX LIABILITY                                                                               18,500                  47,470

COMMITMENT AND CONTINGENCIES                                                                             --                      --

STOCKHOLDERS' EQUITY:
Capital Stock - Common, $.01 Par Value,
Authorized 15,000,000 Shares; Issued 7,408,524
at December 31, 2006 and June 30, 2006
[of which 2,585,220 are in Treasury at December
31, 2006 and June 30, 2006]                                                                          74,085                  74,085


Paid-in Capital                                                                                  10,574,670              10,574,670


Retained Earnings                                                                                 5,267,081               5,441,613
                                                                                               ------------            ------------


Totals                                                                                           15,915,836              16,090,368
Less: Treasury Stock - At Cost                                                                   (7,152,835)             (7,152,835)
                                                                                               ------------            ------------


TOTAL STOCKHOLDERS' EQUITY                                                                        8,763,001               8,937,533
                                                                                               ------------            ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                     $ 10,265,773            $ 10,022,248
                                                                                               ============            ============
</TABLE>

See Notes to Consolidated Financial Statements.

                                                                               1
<PAGE>




                       TRANSNET CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                              THREE MONTHS ENDED DECEMBER 31,
                                                                                              -------------------------------
                                                                                                2006                    2005
                                                                                                ----                    ----
<S>                                                                                          <C>                    <C>
REVENUE
Equipment                                                                                    $ 4,664,629            $ 4,678,762
Services                                                                                       3,115,679              3,825,272
                                                                                             -----------            -----------

Total Revenue:                                                                                 7,780,308              8,504,034
                                                                                             -----------            -----------

COST OF REVENUE
Equipment
                                                                                               4,186,688              4,038,585
Services
                                                                                               2,430,650              2,712,432

Total Cost of Revenue
                                                                                               6,617,338              6,751,017
                                                                                             -----------            -----------

Gross Profit
                                                                                               1,162,970              1,753,017

Selling, General and Administrative Expenses
                                                                                               1,473,880              1,679,697
                                                                                             -----------            -----------

Operating (Loss)  Income
                                                                                                (310,910)                73,320
                                                                                             -----------            -----------

Interest Income
                                                                                                  23,864                  7,139
                                                                                             -----------            -----------

Income (Loss) Before Tax Expense
                                                                                                (287,046)                80,459

Income Tax (Benefit)
                                                                                                (104,784)                28,161
                                                                                             -----------            -----------

Net (Loss)  Income                                                                           $  (182,262)           $    52,298
                                                                                             ===========            ===========

Basic Net Income (Loss)  Per Common Share                                                    $     (0.04)           $      0.01
                                                                                             ===========            ===========

Diluted Net Income (Loss) Per Common Share                                                   $     (0.04)           $      0.01
                                                                                             ===========            ===========

Weighted Average Common Shares Outstanding - Basic
                                                                                               4,823,304              4,823,304
                                                                                             ===========            ===========

Weighted Average Common Shares Outstanding - Diluted
                                                                                               4,823,304              4,916,505
                                                                                             ===========            ===========
</TABLE>

See Notes to Consolidated Financial Statements.

                                                                               2
<PAGE>

                       TRANSNET CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                               SIX MONTHS ENDED DECEMBER 31,
                                                                                               -----------------------------
                                                                                               2006                     2005
                                                                                               ----                     ----
<S>                                                                                         <C>                     <C>
REVENUE
Equipment                                                                                   $  9,673,383            $ 11,977,665
Services                                                                                       6,478,247               7,608,229
                                                                                            ------------            ------------

Total Revenue:                                                                                16,151,630              19,585,894
                                                                                            ------------            ------------

COST OF REVENUE
Equipment                                                                                      8,542,848              10,491,931
Services                                                                                       4,844,489               5,475,929

Total Cost of Revenue                                                                         13,387,337              15,967,860
                                                                                            ------------            ------------

Gross Profit                                                                                   2,764,293               3,618,034

Selling, General and Administrative Expenses                                                   3,089,802               3,438,942
                                                                                            ------------            ------------

Operating (Loss) Income
                                                                                                (325,509)                179,092
                                                                                            ------------            ------------

Interest Income
                                                                                                  46,193                  20,280
                                                                                            ------------            ------------

(Loss) Income Before Tax Expense
                                                                                                (279,316)                199,372

Provision for Income Tax (Benefit)
                                                                                                (104,784)                 68,591
                                                                                            ------------            ------------

Net (Loss) Income                                                                           $   (174,532)           $    130,781
                                                                                            ============            ============

Basic Net Income Per Common Share                                                           $      (0.04)           $       0.03
                                                                                            ============            ============

Diluted Net Income Per Common Share                                                         $      (0.04)           $       0.03
                                                                                            ============            ============

Weighted Average Common Shares Outstanding - Basic
                                                                                               4,823,304               4,823,304
                                                                                            ============            ============

Weighted Average Common Shares Outstanding - Diluted
                                                                                               4,823,304               4,925,992
                                                                                            ============            ============
</TABLE>

See Notes to Consolidated Financial Statements.

                                                                               3
<PAGE>

                       TRANSNET CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                             SIX MONTHS ENDED DECEMBER 31,
                                                                                             -----------------------------
                                                                                             2006                     2005
                                                                                             ----                     ----
<S>                                                                                       <C>                     <C>
OPERATING ACTIVITIES:
Net (Loss) Income                                                                         $  (174,532)            $   130,781
                                                                                          -----------             -----------
Adjustments to Reconcile Net Income
    to Net Cash:
Depreciation and Amortization                                                                 102,630                 120,316
Provision for Doubtful Accounts                                                               (70,000)                 30,000
Deferred Income Taxes                                                                        (104,784)                 74,670

Changes in Assets and Liabilities:
(Increase) Decrease in:
Accounts Receivable                                                                        (2,989,964)             (1,303,514)
Inventory                                                                                     558,684              (2,314,480)
Other Current Assets                                                                          (57,894)               (100,408)
Other Assets                                                                                   (1,839)                 (2,122)

Increase (Decrease) in:
Accounts Payable and Accrued Expenses                                                         448,374               1,198,118
Income Tax Payable                                                                             (5,370)                     --
                                                                                          -----------             -----------

Total Adjustments                                                                         $(2,120,163)            $(2,297,420)
                                                                                          -----------             -----------

NET CASH - OPERATING ACTIVITIES - FORWARD                                                 $(2,294,695)            $(2,166,639)
                                                                                          -----------             -----------

INVESTING ACTIVITIES:
Capital Expenditures                                                                      $   (41,710)            $   (46,895)
                                                                                          -----------             -----------

NET CASE - INVESTING ACTIVITIES                                                           $   (41,710)            $   (46,895)
                                                                                          -----------             -----------

FINANCING ACTIVITIES -
Floor Plan Payable - Net                                                                        4,021                (938,600)

NET (DECREASE) INCREASE IN CASH                                                           $(2,332,384)            $(3,152,134)


CASH AND CASH EQUIVALENTS AT                                                              $ 4,034,495             $ 5,752,404
BEGINNING OF PERIODS                                                                      -----------             -----------

CASH AND CASH EQUIVALENTS AT
END OF PERIODS                                                                            $ 1,702,111             $ 2,600,270
                                                                                          -----------             -----------

Supplemental Disclosures of Cash Flow
Information:

Cash paid during the period for:

Interest                                                                                           --             $        --

Income Taxes                                                                                       --             $        --

See Notes to Consolidated Financial Statements.
</TABLE>

                                                                               4
<PAGE>

                       TRANSNET CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(1.)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       (a) Consolidation: The consolidated financial statements include the
       accounts of the Corporation and its wholly owned subsidiary, Century
       American Corporation. Intercompany transactions and accounts have been
       eliminated in consolidation.

       (b) Inventory: Inventory consists of finished goods. The Corporation's
       inventory is valued at the lower of cost (determined on the average cost
       basis) or market.

       (c) Cash and Cash Equivalents: For the purposes of the statement of cash
       flows, the Corporation considers highly liquid debt instruments,
       purchased with a maturity of three months or less, to be cash
       equivalents.

       (d) Earnings Per Share: Earnings per common share - basic are based on
       4,823,304 weighted shares outstanding for the three months ended December
       31, 2006 and 2005, and 4,823,304 weighted shares outstanding for the six
       months ended December 31, 2006 and 2005. Diluted are based on 4,823,304
       and 4,916,505 weighted shares outstanding for the three months ended
       December 31, 2006 and 2005, respectively, and 4,823,304 and 4,925,992
       weighted shares outstanding for the six months ended December 31, 2006
       and 2005, respectively.

       (e) In the opinion of management, the accompanying unaudited consolidated
       financial statements contain all adjustments consisting only of normal
       recurring adjustments necessary to present fairly the financial position,
       the results of operations and cash flows for the periods presented.

       (f) These statements should be read in conjunction with the summary of
       significant accounting policies and notes contained in the Corporation's
       annual report on Form 10-K for the year ended June 30, 2006.

       (g) The results of operations for the three months ended December 31,
       2006 are not necessarily indicative of the results to be expected for the
       entire year.

       (h) New Accounting Pronouncements:

                  In December 2004, the FASB issued SFAS No. 123R (Revised 2005)
                  "Share-Based Payment." The statement requires that the
                  compensation cost relating to share-based payment transactions
                  be recognized in financial statements. That cost will be
                  measured based on the fair value of the equity or liability
                  instrument issued. The statement covers a wide range of
                  share-based compensation arrangements including share options,
                  restricted share plans, performance-based awards, share
                  appreciation rights, and employee share purchase plans. The
                  Company has adopted the requirements contained in this
                  statement, the effects of which are reflected in the financial
                  statements for this quarter. The Company was required to adopt
                  SFAS 123 (R) as of July 1, 2006.

                  In March 2005, the FASB issued Interpretation No. 47 (FIN 47)
                  "Accounting for Conditional Asset Retirement Obligations,"
                  which refers to a legal obligation to perform an asset
                  retirement activity in which the timing or method of
                  settlement are conditional

                                                                               5
<PAGE>

                  on a future event that may or may not be within the control of
                  the entity. A liability must be recognized for such an
                  obligation (e.g. major clean-up costs under a leasehold) when
                  incurred if the liability's fair value can reasonably be
                  estimated. The adoption of this statement is required for
                  fiscal years beginning after December 15, 2005. The adoption
                  of this statement is not expected to have a material impact on
                  the consolidated financial statements of the Company.

                  In May 2005, the FASB issued SFAS No. 154 "Accounting Changes
                  and Error Corrections". This Statement replaces APB Opinion
                  No. 20, Accounting Changes, and FASB Statement No. 3,
                  "Reporting Accounting Changes in Interim Financial
                  Statements", and changes the requirements for the accounting
                  for and reporting of a change in accounting principle. This
                  Statement applies to all voluntary changes in accounting
                  principle. It also applies to changes required by an
                  accounting pronouncement in the unusual instance that the
                  pronouncement does not include specific transition provisions.
                  When a pronouncement includes specific transition provisions,
                  those provisions should be followed. Adoption of this
                  statement is required for fiscal years starting after December
                  15, 2005. The Company has adopted the requirements contained
                  in this statement, the effects of which are reflected in the
                  financial statements. T he adoption of this statement is not
                  expected to have a material impact on the consolidated
                  financial statements of the Company.

                  In February 2006, the FASB issued SFAS No. 155 "Accounting for
                  Certain Hybrid Financial Instruments (as amended)". This
                  Statement amends FASB Statements No. 133, Accounting for
                  Derivative Instruments and Hedging Activities, and No. 140,
                  Accounting for Transfers and Servicing of Financial Assets and
                  Extinguishment of liabilities, and, resolves issues addressed
                  in Statement No. 133 Implementation Issue No. D1, "Application
                  of Statement No. 133 to Beneficial Interests in Securitized
                  Financial Assets". This Statement requires the evaluation of
                  interest securitized financial assets to identify interests
                  that are freestanding derivatives or that are hybrid financial
                  instruments that contain an embedded derivative requiring
                  bifurcation. This Statement clarifies that embedded
                  derivatives do not include concentrations of credit risk in
                  the form subordination and further clarifies the accounting
                  for interest-only and principal-only strips. This statement
                  also eliminates the prohibition on a qualifying
                  special-purpose entity from holding a derivative financial
                  instrument that pertains to a beneficial interest other than
                  another derivative financial instrument. Lastly, this
                  statement permits fair value measurement for any hybrid
                  financial instrument that contains an embedded derivative that
                  would otherwise require bifurcation. The adoption of this
                  Statement is effective for financial statements with fiscal
                  years beginning or after September 15, 2006, or for all
                  financial instruments acquired or issued beginning on or after
                  September 15, 2006. The adoption of this statement is not
                  expected to have a material impact on the consolidated
                  financial statements of the Company.

                  In March 2006, the FASB issued SFAS No. 156, "Accounting for
                  Servicing of Financial Assets- An Amendment of FASB Statement
                  No. 140". This Statement amends FASB Statement No. 140
                  "Accounting for Transfers and Servicing of Financial Assets
                  and Extinguishments of Liabilities," with respect to the
                  accounting for separately recognized servicing assets and
                  servicing liabilities. This Statement requires the recognition
                  of a servicing asset or liability initially measured at fair
                  value, for every obligation incurred for contracts to service
                  financial assets in certain sales-type transfers, qualifying
                  special purpose entity transfers, or in certain acquisitions
                  that do not relate to the financial servicer or its
                  consolidated affiliates. This Statement permits the choice of
                  either the

                                       6
<PAGE>

                  amortization method or the fair value method for each class of
                  separately recognized servicing assets and servicing
                  liabilities, and, requires separate disclosure at fair value
                  in the statement of financial position. The adoption of this
                  Statement is effective for financial statements beginning with
                  fiscal years on or after September 15, 2006. The adoption of
                  this statement is not expected to have a material impact on
                  the consolidated financial statements of the Company.

                  In June 2006, the FASB issued FIN No. 48, "Accounting For
                  Uncertainty in Income Taxes - An Interpretation of FASB
                  Statement No. 109 Accounting For Income Taxes". T his
                  interpretation requires a recognition threshold and
                  measurement attribute for the financial statement recognition
                  and measurement of a tax position taken or expected to be
                  taken in a tax return. This interpretation also provides
                  guidance on derecognition, classification, interest,
                  penalties, accounting in interim periods, disclosure and
                  transition. This interpretation requires the evaluation of
                  whether the technical merits of a tax position is more likely
                  or not to be sustained upon examination, including the
                  resolution of any related appeals or litigation. The Statement
                  requires the measurement of the largest amount of benefit that
                  is greater than a 50% likelihood of being realized upon final
                  settlement, presuming the position will be examined by the
                  appropriate taxing authority with the benefit of full
                  knowledge and relevant information. The adoption of this
                  interpretation is effective for fiscal years beginning after
                  December 15, 2006.

                  In September, 2006, the FASB issued SFAS No. 157, "Fair Value
                  Measurements". This Statement defines fair value as `exit
                  prices' NOT `entry prices' in generally accepted accounting
                  principles (GAAP), and expands disclosures about fair value
                  measurements for the purpose of promoting consistency and
                  simplification of the existing codification of accounting
                  principles. To eliminate differences in practice and reduce
                  complexity in the application of GAAP, the Statement
                  emphasizes that fair value is a market-based measurement, not
                  an entity specific measurement and should be determined based
                  on the assumptions that market participants would use in
                  pricing the asset or liability. T his statement establishes a
                  fair value hierarchy that distinguishes between observable and
                  unobservable inputs and clarifies the need for adjustments to
                  fair value based on nonperformance, and other market risk
                  assessment criteria, certain asset or event restrictions, and
                  trading blockage. The adoption of this Statement is effective
                  for financial statements beginning with fiscal years on or
                  after September 15, 2007, including interim financial
                  statements within that fiscal year.

                  In September 2006, the Securities and Exchange Commission
                  released Staff Accounting Bulletin No. 108, "Considering the
                  Effects of Prior Year Misstatements when Quantifying
                  Misstatements in Current Year Financial Statements" ("SAB
                  108"). SAB 108 provides guidance regarding the methodology for
                  quantifying and evaluating the materiality of financial
                  statement misstatements. SAB 108 is effective for fiscal years
                  ending after November 15, 2006. Application of the guidance in
                  SAB 108 is not expected to have a material effect on the
                  Company's financial position, cash flows or results of
                  operations.

                  In October, 2006, the FASB issued SFAS No.158, "Employers'
                  Accounting for Defined Benefit Pension and other
                  Postretirement Plans- An amendment of FASB Statements No. 87,
                  88, 106 and 132(R)". This statement requires an employer to
                  recognize the overfunded or underfunded status of a defined
                  benefit postretirement plan, other than a multiemployer plan,
                  as an asset or liability in its statement of financial
                  position and to recognize changes in that funded status in the
                  year in which the changes occur through

                                                                               7
<PAGE>

                  the comprehensive income of a business entity. This statement
                  requires the measurement and recognition of the difference
                  between plan assets at fair value and the benefit obligation,
                  as of the date of the employer's fiscal year-end statement of
                  financial position. This statement also requires additional
                  disclosure in the footnotes to the financial statements about
                  certain effects on net periodic benefit cost for the next
                  fiscal year that arise from delayed recognition of the gains
                  or losses, prior service costs or credits, and transition
                  assets or obligations. Employers who have issued outstanding
                  publicly traded equity securities are required to adopt this
                  Statement by initially recognizing the funded status of a
                  defined benefit postretirement plan including the required
                  footnote disclosures as of the end of the fiscal year ending
                  after December 15, 2006.


(2.) INCOME TAXES
       The Corporation has a deferred tax asset of $209,755 and a deferred tax
       liability of $18,500 based upon temporary timing differences including
       inventory capitalization, allowance for doubtful accounts, vacation pay
       accruals and depreciation.

                                                                               8
<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Revenues and earnings decreased in the quarter and six-month period ended
December 31, 2006 as compared to the same periods in the prior year, primarily
due to a decrease in service revenues, as well as an overall slowdown in
equipment sales. Revenues for the quarter ended December 31, 2006 were
$7,780,308, a decrease from $8,504,034 for the quarter ended December 31, 2005.
For the quarter ended December 31, 2006 the Corporation reported a net loss of
$182,262 as compared with net income of $52,298 for the similar period in the
prior fiscal year. Revenues for the six months ended December 31, 2006 were
$16,151,630 as compared with $19,585,894 for the same period ended December 31,
2005, with a net loss of $174,532 for the six-month period ended December 31,
2006, compared with net income of $130,781 for the same period in the prior
fiscal year.

During the quarter and six-month period in 2006, revenues from hardware sales
and service revenues decreased due to reduced sales of equipment and services.
The decreases were also due in part to continued delays in initiation of state
funded educational projects. As a result of these reductions combined with
factors discussed below, operations resulted in a pre-tax loss of $287,046 for
the quarter ended December 31, 2006, as compared to pre-tax income of $80,459 in
the same period in the prior year. For the six months ended December 31, 2006,
operations resulted in a pre-tax loss of $279,316 compared to pre-tax earnings
of $199,372. Further impacting the Corporation's results, the increased level of
technical sophistication of projects, for example, VoIP installations, requires
the Corporation to maintain a high skill level among its technical staff, with
corresponding increases in salaries and related personnel expenses. These
factors contributed to decreased profit margins on service revenues, and
combined with the decrease in revenues, caused gross profit to decrease for the
quarter and the six-month period ended December 31, 2006. Profit margins on
hardware sales remained relatively constant.

During the December 2006 quarter, the Corporation initiated new projects and
continued work on existing awards for IPC products and services. Certain of
these projects involve installations in buildings yet to be constructed, and the
construction is scheduled to take place over several quarters. The Corporation's
installations in these projects remains at a fixed length of time, which
typically approximates three months, regardless of when the construction reaches
the degree of completion at which the Corporation begins its work at the
respective site. Management notes that initiation of some of these projects has
been affected by construction delays beyond the Corporation's control, and
through the referenced periods, these delays have resulted in an order backlog.
None of these delays have had any significant impact upon the operations of the
Corporation. In addition to orders and awards already received, indications of
interest have been received by existing and prospective clients with respect to
IPC products and services and security technology, areas which management has
targeted as growth areas for the Corporation. Although requests for quotations
have increased in the past few months and management is cautiously optimistic,
assurances cannot be given that all quotations will produce orders.

With respect to selling, general and administrative expenses, expenses remained
relatively constant at approximately 19% of revenues for the December 2006
quarter, with slightly decreased costs, as compared to approximately 20% of
revenue for the December 2005 quarter. For the six months ended December 31,
2006, selling, general and administrative costs were approximately 19% of
revenue, as compared to 18% for the six month period ended December 31, 2005 as
a result of the decrease in revenues. Expenses for the referenced periods
reflect the Corporation's expansion of its sales staff based upon its
anticipated growth, particularly in business related to the convergence of
voice, video, and data

                                                                               9
<PAGE>

networks in the IPC marketplace. Management continues its efforts to control and
reduce administrative and personnel related costs.

As part of the industry competition pressures discussed herein, management
continues to see certain erosion in business related to Fortune 500 customers as
those customers enter into and/or expand business relationships with large
global partners. Although management believes that its focus on higher margin
services related to IPC and security will lead to continued growth and
opportunities that will help compensate for this reduction, no assurances can be
given that the Corporation will be able to replace the loss of a significant
amount of business from these customers, should that occur, or that such
operations will not be adversely effected. Although management believes that
projects performed during 2006 and fiscal 2007 to date replaced much of the
reduced business, and believes its focus on higher margin services related to
VoIP/IP Telephony and security will lead to continued growth and opportunities
that will help compensate for this reduction, no assurances can be given that
the Corporation will be able to replace the loss of a significant amount of
legacy business from this sector of its customer base, should that occur, or
that operations will not be adversely effected. In this regard, in addition to
orders and awards already received, indications of interest have been received
by existing and prospective clients with respect to VoIP/IP products and
services and security technology, areas which management has targeted as growth
areas for the Corporation. Although requests for quotations have increased in
the past few months and management is cautiously optimistic, assurances cannot
be given that all quotations will produce orders.

Management continues its concentration on sales of sophisticated network and
system integration products which typically yield higher profit margins, and
continues adherence to and implementation of cost control measures. To maximize
profit margins, management consistently works to obtain the best discounts
available to it on hardware purchases from its distributors. Management also
utilizes new trends such as manufacturers' direct shipment and billing of the
customers in exchange for payment to the Corporation of an "agency fee" as a
means to reduce equipment related costs while increasing profits. Management
believes that this approach, although it may impact revenues, insulates the
corporation from challenges which may accompany sudden price decreases, hardware
obsolescence and delays collection of receivables. These sales supplement sales
through traditional channels, and are not a material source of revenue.

The computer industry continues to experience decreasing prices of computers and
related equipment. Management believes that this will continue, but hopes to
offset these decreases by expansion of its IPC sales. Industry wide, the result
of price erosion has been lower profit margins on sales, which require
businesses to sell a greater volume of equipment to maintain past earning
levels. Another result of the price decreases has been intensified competition
within the industry, including the consolidation of businesses through merger or
acquisition, the initiation of sales by many manufacturers directly to the
end-user, and the entrance of manufacturers into technical services business.
Management believes that the adoption of policies by many larger corporate
customers, which limit the number of vendors permitted to provide goods and
services for specified periods of time, has further increased price competition.

During the periods discussed, the IT industry as a whole was impacted by a
significant slowdown in client spending. Clients have begun to scrutinize their
IT spending and the related returns on investments before incurring new
expenses. Management believes that future spending will be subject to specific
criteria, but also believes that as single source provider, the Corporation will
be in a better position to satisfy client demands for cost-effectiveness and a
suitable return on investment. Service related revenues, a material segment of
revenues, are significant in their contributions to net income because these
operations yield a higher profit margin than equipment sales. For the fiscal
quarters discussed, revenue from the provision of service, support, outsourcing
and network integration was largely attributable to the Corporation's service
contracts with a number of corporate customers to provide

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<PAGE>

service and support for the customer's personal computers, peripherals and
networks. Most of these contracts are short-term, and contain provisions which
permit early termination. Although the contracts generally contain renewal
terms, there is no assurance that such renewals will occur.

With respect to certain support services, Management has noted a transition to
project-based business, in which services are rendered for a specific project,
such as a VoIP installation, rather than contract based business, in which
technical services are rendered for a specific period of time. Accordingly, the
Corporation must rely more upon projects as a source of revenues. Industry
changes have also diminished the demand for certain legacy support services,
such as help desk, as demand for services such as those related to VoIP systems
and call centers has increased. The Corporation has modified its service
offerings in response to these industry fluctuations, and has recruited
experienced systems engineers and project managers to respond to increased VoIP
projects. The Corporation has modified its service offerings, and is marketing
service contracts to provide remote monitoring services, and contracts which
allow for remote as well as on-site services. Remote monitoring and remedial
services allow for greater utilization of the Corporation's technical staff. In
addition, the Corporation has established a Support Call Center operating from
its Branchburg, New Jersey headquarters.

The Corporation's performance is also impacted by other factors, many of which
are not within its control. These factors include: the short-term nature of
client's commitments; patterns of capital spending by clients; the timing and
size of new projects; pricing changes in response to competitive factors; the
availability and related costs of qualified technical personnel; timing and
customer acceptance of new product and service offerings; trends in IT
outsourcing; product constraints; and industry and general economic conditions.

LIQUIDITY AND CAPITAL RESOURCES

There are no material commitments of the Corporation's capital resources.

The Corporation currently finances a portion of its accounts receivable and
finances purchases of portions of its inventory through floor-planning
arrangements under which such inventory secures the amount outstanding. Floor
planning payables decreased in the 2006 period compared to the same period in
2005 as the result of purchases conducted through other channels. Inventory
decreased in the quarter and six months ended December 31, 2006 as compared to
the corresponding periods in 2005 as a result of reduced sales.

Accounts receivable increased for the quarter and six months ended December 31,
2006 as compared to the same periods in 2005 as a result of billing for orders
completed at the end of the December 2006 quarter. Corresponding with the
increased accounts receivables, cash levels decreased in the three and six
months ended December 31, 2006 as compared to the same periods in 2005, as funds
were used to finance hardware sales, inventory, and certain project related
services required to fulfill customer orders. Accounts payable increased in the
December 2006 period as compared to the same period in 2005 as a direct result
of the increase in inventory at the end of the quarter.

Management continues its efforts to control administrative and personnel related
costs.

Interest income, not a material source of income, increased in both the quarter
and six months ended December 31, 2006 as compared to the same periods in 2005,
due to more favorable interest rates.

For the fiscal quarter and six months ended December 31, 2006, as in the similar
periods in the prior year, the internal resources of the Corporation were
sufficient to enable the Corporation to meet its obligations.

                                                                              11
<PAGE>

IMPACT OF INFLATION

The effects of inflation on our operations were not significant during the
periods presented.


CONTRACTUAL OBLIGATIONS

Contractual Obligations    Total   Less than       1-3        3-5   More than
-----------------------    -----   One Year      Years      Years     5 Years
                                   --------      -----      -----     -------

Real Estate Lease       $773,355    $92,803   $375,077   $305,475          --

Office Equipment          $2,772     $2,772         --         --          --


CRITICAL ACCOUNTING POLICIES

The Corporation's financial statements are prepared in accordance with
accounting principles that are generally accepted in the United States. The
methods, estimates, and judgments used in applying these most critical
accounting policies have a significant impact on the results reported in the
financial statements. The Securities and Exchange Commission has defined
critical accounting policies as policies that involve critical accounting
estimates that require (a) management to make assumptions that are highly
uncertain at the time the estimate is made and (b) different estimates that
could have been reasonably used for the current period, or changes in the
estimates that are reasonably likely to occur from period to period, which would
have a material impact on the presentation of our financial condition, changes
in financial condition or in result of operations. Based on this definition, the
most critical policies include: revenue recognition, allowance for doubtful
accounts, and valuation of deferred tax assets.

REVENUE RECOGNITION
Revenues related to our equipment sales are recognized when evidence of an
arrangement exists, delivery of equipment has occurred, the sales price of the
equipment being sold to our customers is both fixed and determinable and
collectability of the accounts receivable related to the equipment sale is
reasonably assured in accordance with SEC Staff Accounting Bulletin No. 104
Topic 13.

Revenues related to our services are recognized as the service is performed
using the percentage of completion method of accounting under which the total
contract revenue during the term of an agreement is recognized on the basis of
the percentage that each contract's proportional performance to date bears to
the total completion of performance. Estimates of proportional performance are
continuously monitored during the term of the contract, and recorded revenues
and costs are subject to revision as the contract progresses.

ACCOUNTS RECEIVABLE
Accounts receivable are reported at their outstanding unpaid principal balances
reduced by an allowance for doubtful accounts, based on certain percentages of
aged receivables. We estimate doubtful accounts based on historical bad debts,
factors related to specific customers' ability to pay and current economic
trends.

                                                                              12
<PAGE>

VALUATION OF DEFERRED TAX ASSETS
At December 31, 2006, we have a valuation allowance of approximately $1,370,000
primarily to reduce our deferred tax asset, which is based on a net operating
loss carry forwards of $3,700,000 to an amount that will more likely than not be
realized. These net operating loss carry forwards have varying carry forward
periods and restrictions on usage. The estimation of future taxable income and
our resulting ability to utilize net operating loss and tax credit carry
forwards can significantly change based on future events, including our
determinations as to the feasibility of certain tax planning strategies. Thus,
recorded valuation allowances may be subject to material future changes.

THE MATTERS DISCUSSED IN MANAGEMENT'S DISCUSSION AND ANALYSIS AND THROUGHOUT
THIS REPORT THAT ARE FORWARD-LOOKING STATEMENTS ARE BASED ON CURRENT MANAGEMENT
EXPECTATIONS THAT INVOLVE RISK AND UNCERTAINTIES. POTENTIAL RISKS AND
UNCERTAINTIES INCLUDE, WITHOUT LIMITATION: THE IMPACT OF ECONOMIC CONDITIONS
GENERALLY AND IN THE INDUSTRY FOR MICROCOMPUTER PRODUCTS AND SERVICES;
DEPENDENCE ON KEY VENDORS; CONTINUED COMPETITIVE AND PRICING PRESSURES IN THE
INDUSTRY; PRODUCT SUPPLY SHORTAGES; OPEN-SOURCING OF PRODUCTS OF VENDORS; RAPID
PRODUCT IMPROVEMENT AND TECHNOLOGICAL CHANGE, SHORT PRODUCT LIFE CYCLES AND
RESULTING OBSOLESCENCE RISKS; TECHNOLOGICAL DEVELOPMENTS; CAPITAL AND FINANCING
AVAILABILITY; AND OTHER RISKS SET FORTH HEREIN.







ITEM 4.  CONTROL AND PROCEDURES

The Chief Executive Officer and Chief Financial Officer of the Corporation have
concluded, based on their evaluation as of December 31, 2006, that the
Corporation's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Corporation in the reports filed or
submitted by it under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and include controls and
procedures designed to ensure that information required to be disclosed by the
Corporation in such reports is accumulated and communicated to the Corporation's
management, including the Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.

There were no significant changes in the Corporation's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of such evaluation.

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<PAGE>

                                     PART II
                                OTHER INFORMATION



ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K

         A. Exhibits -
             31.1 Certification required by Section 302
             31.2 Certification required by Section 302
             32 Certification required by Section 906

         B. Reports on Form 8-K -
              On November 14, 2006, TransNet Corporation filed a Form 8-K under
              Item 7.01.



                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                     TRANSNET CORPORATION
                                     (Registrant)


                                     /s/ Steven J. Wilk
                                     --------------------------------------
                                     Steven J. Wilk, President and
                                     Chief Executive Officer


                                     /s/ John J. Wilk
                                     --------------------------------------
                                     John J. Wilk,
                                     Principal Financial and Accounting Officer
                                     And Chairman of the Board of Directors



DATE:  February 13, 2007


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